Groupon Announces Fourth Quarter and Fiscal Year 2012 Results

  Groupon Announces Fourth Quarter and Fiscal Year 2012 Results

  *Fourth quarter consolidated gross billings of $1.52 billion, up 24%
    year-over-year
  *Fourth quarter consolidated revenue of $638.3 million, up 30%
    year-over-year
  *Fourth quarter operating loss of $12.9 million, compared with an operating
    loss of $15.0 million in fourth quarter 2011
  *Fourth quarter GAAP loss per share of $0.12, including $0.07 loss per
    share from a non-operating item, compared with a loss per share of $0.12
    in fourth quarter 2011
  *Full year 2012 gross billings grew 35% to $5.38 billion, revenue increased
    45% to $2.33 billion, and operating income of $98.7 million compared to a
    loss of $233.4 million in 2011

Business Wire

CHICAGO -- February 27, 2013

Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter
and fiscal year ended December 31, 2012.

Gross billings, which reflect the total dollar value of customer purchases of
goods and services, excluding any applicable taxes and net of estimated
refunds, increased 24% year-over-year to $1.52 billion in the fourth quarter
2012, compared with $1.23 billion in the fourth quarter 2011. Excluding the
$21.0 million unfavorable impact from year-over-year changes in foreign
exchange rates, gross billings growth was 25% compared with fourth quarter
2011.

Revenue increased 30% year-over-year to $638.3 million in the fourth quarter
2012, compared with $492.2 million in the fourth quarter 2011. Excluding the
$7.7 million unfavorable impact from year-over-year changes in foreign
exchange rates, revenue growth was 31% compared with fourth quarter 2011.
Growth was driven by an increase in direct revenue, which grew 1549%
year-over-year to $225.2 million in the fourth quarter 2012, compared with
$13.7 million in the fourth quarter 2011.

Operating loss was $12.9 million in the fourth quarter 2012, including
stock-based compensation and acquisition-related expenses of $26.6 million,
and depreciation and amortization of $16.0 million. This compares with an
operating loss of $15.0 million in the fourth quarter 2011, which included
stock-based compensation and acquisition-related expenses of $32.9 million,
and depreciation and amortization of $9.3 million. Year-over-year changes in
foreign exchange rates had a $0.1 million favorable impact on operating
results.

"Record billings growth this quarter is a clear signal that customers love
Groupons," said Andrew Mason, CEO of Groupon. "We will continue to invest in
growth through 2013 as we see new opportunities to give our customers what
they want."

Operating cash flow decreased 61% year-over-year to $65.7 million, compared
with $169.1 million in the fourth quarter 2011. Free cash flow, a non-GAAP
financial measure calculated as operating cash flow less capital expenditures,
decreased 83% year-over-year to $25.7 million, compared with $155.1 million in
the fourth quarter 2011. At the end of the quarter, Groupon had $1.2 billion
in cash and cash equivalents and no long-term borrowings.

Fourth quarter 2012 net loss attributable to common stockholders was $81.1
million, or $0.12 per share, reflecting stock-based compensation and
acquisition-related expenses of $26.6 million and share count of 655.7
million. Fourth quarter 2012 results included a pre-tax non-operating loss of
$50.6 million ($45.5 million after tax) related to the impairment of a cost
method investment in China.

Net loss attributable to common stockholders increased by $15.7 million
year-over-year, from a loss of $65.4 million, or $0.12 per share in the fourth
quarter 2011, including stock-based compensation and acquisition-related
expenses of $32.9 million.

Full Year 2012

Gross billings increased 35% year-over-year to $5.38 billion in 2012, compared
with $3.99 billion in 2011. Excluding the $183.5 million unfavorable impact
from year-over-year changes in foreign exchange rates, gross billings growth
was 40% compared with 2011.

Revenue increased 45% year-over-year to $2.33 billion in 2012, compared with
$1.61 billion in 2011. Excluding the $74.1 million unfavorable impact from
year-over-year changes in foreign exchange rates, revenue growth was 50%
compared with 2011. Growth was driven by an increase in direct revenue, which
grew 2083% to $454.7 million in 2012, compared with $20.8 million in 2011.

Operating income was $98.7 million in 2012, including stock-based compensation
and acquisition-related expenses of $105.0 million, and depreciation and
amortization of $55.8 million. This compares with an operating loss of $233.4
million in 2011, which included stock-based compensation and
acquisition-related expenses of $89.1 million, and depreciation and
amortization of $32.1 million. Year-over-year changes in foreign exchange
rates had a $7.4 million unfavorable impact on operating income.

Operating cash flow decreased 8% year-over-year to $266.8 million, compared
with $290.4 million in 2011. Free cash flow decreased 31% year-over-year to
$171.0 million, compared with $246.6 million in 2011.

Full year 2012 net loss attributable to common stockholders was $67.4 million,
or $0.10 per share, reflecting stock-based compensation and
acquisition-related expenses of $105.0 million and share count of 650.2
million.

Net loss attributable to common stockholders improved by $306.1 million
year-over-year, from a loss of $373.5 million, or $1.03 per share in 2011,
including stock-based compensation and acquisition-related expenses of $89.1
million.

                                                                                                                                               
Groupon, Inc.
Summary Consolidated and Segment Results
(dollars in thousands, except share and per share data)
(unaudited)
                                                                                                                                                                    
                Three Months Ended                                            Y/Y %         Year Ended                                                    Y/Y %
                December 31,                                                  Growth        December 31,                                                  Growth
                2012              2011              Y/Y %       FX Effect     excluding     2012              2011              Y/Y %      FX Effect      excluding
                                                    Growth      ^(2)          FX^(2)                                            Growth     ^(2)           FX^(2)
Gross
Billings ^(1)
North America   $ 718,952         $ 475,807         51.1    %   $ (2,569  )   51.6      %   $ 2,373,153       $ 1,561,927       51.9   %   $ (2,780   )   52.1      %
International    801,500         755,061        6.2     %    (18,451 )   8.6       %    3,007,031       2,423,574      24.1   %    (180,739 )   31.5      %
Consolidated    $ 1,520,452      $ 1,230,868      23.5    %   $ (21,020 )   25.2      %   $ 5,380,184      $ 3,985,501      35.0   %   $ (183,519 )   39.6      %
Billings
                                                                                                                                                                    
Revenue
North America   $ 375,351         $ 179,638         108.9   %   $ (1,082  )   109.6     %   $ 1,165,700       $ 634,980         83.6   %   $ (1,156   )   83.8      %
International    262,951         312,526        (15.9 ) %    (6,629  )   (13.7  )  %    1,168,772       975,450        19.8   %    (72,960  )   27.3      %
Consolidated    $ 638,302        $ 492,164        29.7    %   $ (7,711  )   31.3      %   $ 2,334,472      $ 1,610,430      45.0   %   $ (74,116  )   49.6      %
revenue
                                                                                                                                                                    
Operating       $ (12,861     )   $ (14,972     )   14.1    %   $ 135         13.2      %   $ 98,701          $ (233,386    )   N/A        $ (7,401   )   N/A
(loss) income
                                                                                                                                                                    
Net loss
attributable    $ (81,089     )   $ (65,379     )   (24.0 ) %   $ 1,102       (25.7  )  %   $ (67,377     )   $ (373,494    )   82.0   %   $ (9,283   )   84.4      %
to common
stockholders
                                                                                                                                                                    
Net loss per
share
Basic           $ (0.12       )   $ (0.12       )                                           $ (0.10       )   $ (1.03       )
Diluted         $ (0.12       )   $ (0.12       )                                           $ (0.10       )   $ (1.03       )
                                                                                                                                                                    
Weighted
average basic     655,678,123       528,421,712                                               650,214,119       362,261,324
shares
outstanding
Weighted
average
diluted           655,678,123       528,421,712                                               650,214,119       362,261,324
shares
outstanding
                                                                                                                                                                    
                                                                                                                                                                    

      Represents the total dollar value of customer purchases of goods and
(1)  services, excluding applicable taxes and net of estimated refunds.
      Includes direct billings and third party and other billings.
      Represents change in financial measures that would have resulted had
(2)   average exchange rates in the reporting period been the same as those
      in effect in the three months and year ended December 31, 2011.
                                                                             

Highlights

  *Largest sequential gross billings increase in Groupon history. All
    categories contributed to the biggest sequential increase in platform
    growth on an absolute dollar basis in Groupon’s history.
  *Unit milestone. The Company surpassed the 50 million unit mark for the
    first time in the fourth quarter 2012. Consolidated units, defined as
    vouchers and products ordered before cancellations and refunds, grew 21%
    year-over-year.
  *Seasonal strength in Groupon Goods. After a successful holiday season,
    Goods has now reached an annual run rate of about $2.0 billion in global
    billings, just five quarters after its launch.
  *Growing merchant selection and quality. As of the end of the fourth
    quarter, the number of active deals in North America increased almost 300%
    year-over-year to nearly 37,000.
  *Continued customer acquisition efficiencies. Marketing expense per new
    customer improved 61% year-over-year in the fourth quarter 2012, enabling
    the reduction of overall marketing spend by 61% compared with the fourth
    quarter 2011. As of December 31, 2012, Groupon had 41.0 million active
    customers, an increase of 22% year-over-year, with gross customer
    additions partially offset by higher customer inactivations.
  *Substantial growth in mobile transaction activity. In January 2013, nearly
    40% of North American transactions were completed on mobile devices, an
    increase of 44% compared with January 2012. This compares with about one
    third of transactions completed on mobile devices in October 2012.
  *Launch of merchant services in 2012. Groupon launched a number of services
    in 2012 to strengthen relationships with local businesses, including
    Breadcrumb and Payments.

Outlook

Revenue for the first quarter 2013 is expected to be between $560 million and
$610 million, an increase of between 0% and 9% compared with first quarter
2012.

Operating (loss) income for the first quarter 2013 is expected to be between
$(10) million and $10 million, compared with $39.6 million in the first
quarter 2012. This outlook includes $30 million of stock-based compensation,
and assumes no acquisitions or investments, or material changes in foreign
exchange rates.

For the full year 2013, operating income is expected to increase compared with
2012.

A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET,
and will be available on Groupon’s investor relations website at
http://investor.groupon.com. This call will contain forward-looking statements
and other material information regarding the Company’s financial and operating
results.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with generally
accepted accounting principles (GAAP), we have provided the following non-GAAP
financial measures in this release and the accompanying tables: foreign
exchange rate neutral operating results, free cash flow and consolidated
operating income (loss) excluding stock-based compensation and
acquisition-related expense (benefit), net. These non-GAAP financial measures
are presented to aid investors in better understanding Groupon's performance.
However, these measures are not intended to be a substitute for those reported
in accordance with GAAP. These measures may be different from non-GAAP
financial measures used by other companies.

Foreign exchange rate neutral operating results show our current period
operating results as if foreign currency exchange rates had remained the same
as those in effect in the comparable period. These measures are intended to
facilitate comparisons to our historical performance. For a reconciliation of
foreign exchange rate neutral operating results to our GAAP operating results,
see “Reconciliation of Foreign Exchange Rate Neutral Operating Results to U.S.
GAAP Operating Results" and "Supplemental Financial Information and Business
Metrics" included in the tables accompanying this release.

Free cash flow is a non-GAAP measure that comprises net cash provided by
operating activities less purchases of property and equipment and capitalized
software. We use free cash flow, and ratios based on it, to conduct and
evaluate our business because, although it is similar to cash flow from
operations, we believe that it typically represents a more useful measure of
cash flows because purchases of fixed assets, software developed for internal
use and website development costs are necessary components of our ongoing
operations. Free cash flow is not intended to represent the total increase or
decrease in Groupon's cash balance for the applicable period. For a
reconciliation of free cash flow to cash flow from operations, see
''Reconciliation of Free Cash Flow to Net Cash Provided by Operating
Activities'' included in the tables accompanying this release.

Consolidated operating income (loss) excluding stock-based compensation and
acquisition-related expense (benefit), net is a non-GAAP measure that
comprises the consolidated total of the segment operating income (loss) of our
two segments, North America and International. Stock-based compensation
expense and acquisition-related expense (benefit), net are excluded from
segment operating income (loss) that we report under GAAP for our segments.
Stock-based compensation expense is primarily a non-cash item.
Acquisition-related expense (benefit), net represents the change in the fair
value of contingent consideration arrangements related to business
combinations. We use consolidated operating income (loss) excluding
stock-based compensation and acquisition-related expense (benefit), net to
allocate resources and evaluate performance internally. For a reconciliation
of consolidated operating income (loss) excluding stock-based compensation and
acquisition-related expense (benefit), net to consolidated operating income
(loss), see ''Supplemental Financial Information and Business Metrics''
included in the tables accompanying this release.

Note on Forward Looking Statements

The statements contained in this presentation that refer to plans and
expectations for the next quarter or the future are forward- looking
statements that involve a number of risks and uncertainties, and actual
results could differ materially from those discussed. The risks and
uncertainties that could cause our results to differ materially from those
included in the forward-looking statements include, but are not limited to,
volatility in our revenue and operating results; risks related to our business
strategy; responding to changes in the market; effectively dealing with
challenges arising from our international operations; retaining existing
customers and adding new customers; retaining existing merchant partners and
adding new merchant partners; incurring expenses as we expand our business;
competing against smaller competitors and competitors with more financial
resources than us; maintaining favorable terms with our business partners;
maintaining a strong brand; managing inventory and order fulfillment;
integrating our technology platforms; managing refund risks; retaining our
executive team; litigation; regulations, including the CARD Act and regulation
of the Internet; tax liabilities; tax legislation; maintaining our information
technology infrastructure; security breaches; protecting our intellectual
property; handling acquisitions, joint ventures and strategic investments
effectively; seasonality; payment-related risks; customer and merchant partner
fraud; global economic uncertainty; compliance with rules and regulations
associated with being a public company; and our ability to raise capital if
necessary. We urge you to refer to the factors included under the headings
''Risk Factors'' and ''Management’s Discussion and Analysis of Financial
Condition and Results of Operations'' in the company’s Annual Report on Form
10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be
obtained by visiting the company’s Investor Relations web site at
http://investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s
actual results could differ materially from those predicted or implied and
reported results should not be considered an indication of future performance.

You should not rely upon forward-looking statements as predictions of future
events. Although Groupon believes that the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee that the future
results, levels of activity, performance or events and circumstances reflected
in the forward-looking statements will be achieved or occur. Moreover, neither
the company nor any other person assumes responsibility for the accuracy and
completeness of the forward-looking statements. The forward-looking statements
reflect Groupon’s expectations as of February 27, 2013. Groupon undertakes no
obligation to update publicly any forward-looking statements for any reason
after the date of this presentation to conform these statements to actual
results or to changes in its expectations.

Groupon encourages investors to use its investor relations website as a way of
easily finding information about the company. Groupon promptly makes available
on this website, free of charge, the reports that the company files or
furnishes with the SEC, corporate governance information (including Groupon’s
Global Code of Conduct), and select press releases and social media postings.

                                                                 
                                                                      
                                                                      
Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
                                                                      
                      Three Months Ended              Year Ended
                      December 31,                    December 31,
                      2012            2011            2012            2011
Operating
activities
Net loss              $ (80,047   )   $ (59,679   )   $ (51,031   )   $ (297,762  )
Adjustments to
reconcile net loss
to net cash
provided by
operating
activities:
Depreciation and        15,965          9,301           55,801          32,055
amortization
Stock-based             26,411          32,668          104,117         93,590
compensation
Deferred income         (17,259   )     31,601          (7,651    )     32,203
taxes
Excess tax benefits
on stock-based          (2,403    )     1,145           (27,023   )     (10,178   )
compensation
Loss on equity          1,231           6,678           9,925           26,652
method investees
Acquisition-related
expense (benefit),      153             256             897             (4,537    )
net
Gain on return of       -               -               -               (4,916    )
common stock
Gain on E-Commerce      -               -               (56,032   )     -
transaction
Impairment of cost      50,553          -               50,553          -
method investment
Change in assets
and liabilities,
net of
acquisitions:
Restricted cash         (2,517    )     (4,378    )     (4,372    )     (12,519   )
Accounts receivable     12,723          (686      )     10,534          (70,376   )
Prepaid expenses
and other current       (45,922   )     4,731           (70,859   )     (36,292   )
assets
Accounts payable        5,537           927             18,711          (20,997   )
Accrued merchant
and supplier            96,029          65,236          149,918         380,108
payables
Accrued expenses
and other current       (20,268   )     80,164          47,742          189,127
liabilities
Other, net             25,531        1,113         35,604        (5,711    )
Net cash provided
by operating            65,717          169,077         266,834         290,447
activities
                                                                      
Net cash used in
investing               (52,753   )     (34,907   )     (194,979  )     (147,433  )
activities
                                                                      
Net cash (used in)
provided by             (6,495    )     746,913         12,095          867,205
financing
activities
                                                                      
Effect of exchange
rate changes on        1,809         (2,083    )    2,404         (6,117    )
cash and cash
equivalents
Net increase in
cash and cash           8,278           879,000         86,354          1,004,102
equivalents
Cash and cash
equivalents,           1,201,011     243,935       1,122,935     118,833   
beginning of period
Cash and cash
equivalents, end of   $ 1,209,289    $ 1,122,935    $ 1,209,289    $ 1,122,935 
the period
                                                                      
                                                                      
                                                                      

Groupon, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
                                                                       
                      Three Months Ended December 31,     Year Ended December 31,
                      2012              2011              2012              2011
Revenue:
Third party and       $ 413,127         $ 478,510         $ 1,879,729       $ 1,589,604
other revenue
Direct revenue         225,175         13,654          454,743         20,826      
Total revenue           638,302           492,164           2,334,472         1,610,430
Cost of revenue:
Third party and         63,905            86,882            297,739           243,789
other revenue
Direct revenue         218,567         9,383           421,201         15,090      
Total cost of          282,472         96,265          718,940         258,879     
revenue
Gross Profit            355,830           395,899           1,615,532         1,351,551
Operating expenses:
Marketing               60,913            155,299           336,854           768,472
Selling, general        307,625           255,316           1,179,080         821,002
and administrative
Acquisition-related
expense (benefit),     153             256             897             (4,537      )
net
Total operating        368,691         410,871         1,516,831       1,584,937   
expenses
(Loss) income from      (12,861     )     (14,972     )     98,701            (233,386    )
operations
Interest and other
(expense) income,       (48,279     )     (3,835      )     6,166             5,973
net
Loss on equity         (1,231      )    (6,678      )    (9,925      )    (26,652     )
method investees
(Loss) income
before provision        (62,371     )     (25,485     )     94,942            (254,065    )
for income taxes
Provision for          17,676          34,194          145,973         43,697      
income taxes
Net loss                (80,047     )     (59,679     )     (51,031     )     (297,762    )
Less: Net (income)
loss attributable      (936        )    (5,267      )    (3,742      )    18,335      
to noncontrolling
interests
Net loss
attributable to         (80,983     )     (64,946     )     (54,773     )     (279,427    )
Groupon, Inc.
Redemption of
preferred stock in      -                 -                 -                 (34,327     )
excess of carrying
value
Adjustment of
redeemable
noncontrolling         (106        )    (433        )    (12,604     )    (59,740     )
interests to
redemption value
Net loss
attributable to       $ (81,089     )   $ (65,379     )   $ (67,377     )   $ (373,494    )
common stockholders
                                                                            
Net loss per share
Basic                 $ (0.12       )   $ (0.12       )   $ (0.10       )   $ (1.03       )
Diluted               $ (0.12       )   $ (0.12       )   $ (0.10       )   $ (1.03       )
                                                                            
Weighted average
number of shares
outstanding
Basic                   655,678,123       528,421,712       650,214,119       362,261,324
Diluted                 655,678,123       528,421,712       650,214,119       362,261,324
                                                                                          
                                                                                          
                                                                                          

Groupon, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
                                                              
                                                 December 31,
                                                 2012            2011
Assets
Current assets:
Cash and cash equivalents                        $ 1,209,289     $ 1,122,935
Accounts receivable, net                           96,713          108,747
Deferred income taxes                              31,211          19,243
Prepaid expenses and other current assets         150,573       72,402    
Total current assets                               1,487,786       1,323,327
Property, equipment and software, net              121,072         51,800
Goodwill                                           206,684         166,903
Intangible assets, net                             42,597          45,667
Investments                                        84,209          50,604
Deferred income taxes, non-current                 29,916          46,104
Other non-current assets                          59,210        90,071    
Total Assets                                     $ 2,031,474    $ 1,774,476 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                 $ 59,865        $ 40,918
Accrued merchant and supplier payables             671,305         520,723
Accrued expenses                                   246,924         212,007
Deferred income taxes                              53,700          76,841
Other current liabilities                         136,647       144,673   
Total current liabilities                          1,168,441       995,162
Deferred income taxes, non-current                 20,860          7,428
Other non-current liabilities                     100,072       70,766    
Total Liabilities                                 1,289,373     1,073,356 
Commitments and contingencies
Redeemable noncontrolling interests                -               1,653
Stockholders' Equity
Class A common stock, par value $0.0001 per
share, 2,000,000,000 shares authorized,
654,523,706 and 641,745,225 shares issued and      65              64
outstanding at December 31, 2012 and 2011,
respectively
Class B common stock, par value $0.0001 per
share, 10,000,000 shares authorized, 2,399,976     -               -
shares issued and outstanding at December 31,
2012 and 2011
Common stock, par value $0.0001 per share,
2,010,000,000 shares authorized, no shares         -               -
issued and outstanding at December 31, 2012
and 2011
Additional paid-in capital                         1,485,006       1,388,253
Accumulated deficit                                (753,477  )     (698,704  )
Accumulated other comprehensive income            12,446        12,928    
Total Groupon, Inc. Stockholders' Equity           744,040         702,541
Noncontrolling interests                          (1,939    )    (3,074    )
Total Equity                                      742,101       699,467   
Total Liabilities and Equity                     $ 2,031,474    $ 1,774,476 
                                                                             
                                                                             
                                                                             

Groupon, Inc.
Segment Information
(in thousands)
(unaudited)
                                                                       
                      Three Months Ended December 31,     Year Ended December 31,
                      2012              2011              2012              2011
North America
Gross Billings ^      $ 718,952         $ 475,807         $ 2,373,153       $ 1,561,927
(1)
Revenue               $ 375,351         $ 179,638         $ 1,165,700       $ 634,980
Segment cost of
revenue and            358,319         161,399         1,025,974       630,184   
operating
expenses^(2)(3)
Segment operating     $ 17,032          $ 18,239          $ 139,726         $ 4,796
income^(3)
Segment income as a
percent of segment      4.5         %     10.2        %     12.0        %     0.8         %
revenue
                                                                                          
International
Gross Billings ^(1)   $ 801,500         $ 755,061         $ 3,007,031       $ 2,423,574
Revenue               $ 262,951         $ 312,526         $ 1,168,772       $ 975,450
Segment cost of
revenue and            266,280         312,813         1,104,783       1,124,579 
operating
expenses^(2)(3)
Segment operating     $ (3,329    )     $ (287      )     $ 63,989          $ (149,129  )
(loss) income^(3)
Segment (loss)
income as a percent     (1.3      ) %     (0.1      ) %     5.5         %     (15.3     ) %
of segment revenue
                                                                                          
Consolidated
Gross Billings ^(1)   $ 1,520,452       $ 1,230,868       $ 5,380,184       $ 3,985,501
Revenue               $ 638,302         $ 492,164         $ 2,334,472       $ 1,610,430
Segment cost of
revenue and            624,599         474,212         2,130,757       1,754,763 
operating
expenses^(2)
Segment operating     $ 13,703          $ 17,952          $ 203,715         $ (144,333  )
income (loss)
Segment income
(loss) as a percent     2.1         %     3.6         %     8.7         %     (9.0      ) %
of segment revenue
                                                                                          
Stock-based             26,411            32,668            104,117           93,590
compensation
Acquisition-related
expense (benefit),     153             256             897             (4,537    )
net
Operating (loss)        (12,861   )       (14,972   )       98,701            (233,386  )
income
                                                                                          
Interest and other
expense (income),       48,279            3,835             (6,166    )       (5,973    )
net
Loss on equity         1,231           6,678           9,925           26,652    
method investees
(Loss) income
before provision        (62,371   )       (25,485   )       94,942            (254,065  )
for income taxes
Provision for          17,676          34,194          145,973         43,697    
income taxes
Net loss              $ (80,047   )     $ (59,679   )     $ (51,031   )     $ (297,762  )
                                                                                          

      Represents the total dollar value of customer purchases of goods and
(1)  services, excluding applicable taxes and net of estimated refunds.
      Includes direct billings and third party and other billings.
      Represents cost of revenue and operating expenses, excluding
(2)   stock-based compensation and acquisition-related expense
      (benefit), net.
      We record intercompany cross-charges every period for services provided
      by the United States to our international subsidiaries. We updated our
      intercompany allocations for those charges during the fourth quarter of
(3)   2012, which resulted in a one-time $8.5 million decrease to
      International Segment operating expenses (reduction to International
      Segment operating loss) and a corresponding increase to North America
      Segment operating expenses (reduction to North America Segment operating
      income).
      
      
      

Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities
(in thousands)
(unaudited)
                                                             
The following is a reconciliation of free cash flow to the most comparable
U.S. GAAP measure, “Net cash provided by operating activities,” for the three
months and years ended December 31, 2012 and 2011, respectively:
                                                                  
                Three Months Ended December 31,    Year Ended December 31,
                2012              2011             2012           2011
Net cash
provided by     $  65,717         $  169,077       $ 266,834      $ 290,447
operating
activities
Purchases of
property and
equipment         (40,034  )       (13,986  )     (95,836  )    (43,811  )
and
capitalized
software
Free cash       $  25,683        $  155,091      $ 170,998     $ 246,636  
flow
                                                                  
Net cash
used in         $  (52,753  )     $  (34,907  )    $ (194,979 )   $ (147,433 )
investing
activities
Net cash
(used in)
provided by     $  (6,495   )     $  746,913       $ 12,095       $ 867,205
financing
activities
                                                                             
                                                                             
                                                                             

Reconciliation of Foreign Exchange Rate Neutral Operating Results to Revenue and (Loss) Income from
Operations
(in thousands)
(unaudited)
                                                                                  
The following is a reconciliation of foreign exchange rate neutral operating results to the most
comparable U.S. GAAP measures, "Revenue" and "(Loss) Income from operations," for the three months and
year ended December 31, 2012:
                                                                                         
The effect on the Company’s consolidated statements of operations from changes in exchange rates
versus the U.S. Dollar for the three months ended December 31, 2012 are as follows:
                                                                                         
             Three Months Ended December 31, 2012          Three Months Ended December 31, 2012
             At Avg.         Exchange                      At Avg.         Exchange
             Q4 2011         Rate          As              Q3 2012         Rate          As
             Rates ^(1)      Effect ^(2)   Reported        Rates ^(3)      Effect ^(2)   Reported
Revenue      $ 646,013       $ (7,711  )   $ 638,302       $ 634,734       $ 3,568       $ 638,302
Loss from    $ (12,996   )   $ 135         $ (12,861   )   $ (12,075   )   $ (786    )   $ (12,861   )
operations
                                                                                         
The effect on the Company’s consolidated statements of operations from changes in exchange rates
versus the U.S. Dollar for the year ended December 31, 2012 are as follows:
                                                                                         
             Year Ended December 31, 2012                  Year Ended December 31, 2012
             At Avg.         Exchange                      At Avg.         Exchange
             2011            Rate          As              Q4'11 - Q3'12   Rate          As
             Rates ^(1)      Effect ^(2)   Reported        Rates ^(3)      Effect ^(2)   Reported
Revenue      $ 2,408,588     $ (74,116 )   $ 2,334,472     $ 2,344,952     $ (10,480 )   $ 2,334,472
Income
from         $ 106,102       $ (7,401  )   $ 98,701        $ 105,467       $ (6,766  )   $ 98,701
operations
                                                                                         

      Represents the outcome that would have resulted had average exchange
(1)  rates in the reported period been the same as those in effect during the
      three months and year ended December 31, 2011.
      Represents the increase or decrease in reported amounts
(2)   resulting from changes in exchange rates from those in effect
      in the comparable period.
      Represents the outcome that would have resulted had average exchange
(3)   rates in the reported period been the same as those in effect during the
      three and twelve months ended September 30, 2012.
      
      
      

Supplemental Financial Information and Business Metrics^(13)
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
                                                                                                                                         
                      Q1 2011 ^(8)      Q2 2011           Q3 2011           Q4 2011           Q1 2012           Q2 2012         Q3 2012           Q4 2012
                                                                                                                                                                
Segments
North America
Segment:
Gross Billings ^(1)   $ 315,152         $ 369,990         $ 400,978         $ 475,807         $ 553,557         $ 548,275       $ 552,369         $ 718,952
Year-over-year          610         %     359         %     204         %     118         %     76          %     48        %     38          %     51          %
growth
% of Consolidated       47          %     40          %     35          %     39          %     41          %     43        %     45          %     47          %
Gross Billings
Gross Billings ^(1)
Trailing Twelve       $ 745,772         $ 1,035,183       $ 1,304,128       $ 1,561,927       $ 1,800,332       $ 1,978,617     $ 2,130,008       $ 2,373,153
Months (TTM)
                                                                                                                                                                
Revenue:
Third Party and       $ 136,612         $ 157,205         $ 161,525         $ 179,638         $ 230,984         $ 207,119       $ 158,545         $ 165,776
Other Revenue ^ (2)
Direct Revenue ^       -               -               -               -               7,581           53,062         133,058         209,575   
(2)
Total Revenue         $ 136,612         $ 157,205         $ 161,525         $ 179,638         $ 238,565         $ 260,181       $ 291,603         $ 375,351
Year-over-year          574         %     341         %     188         %     103         %     75          %     66        %     81          %     109         %
growth
% of Consolidated       46          %     40          %     38          %     36          %     43          %     46        %     51          %     59          %
Revenue
Revenue TTM           $ 316,752         $ 438,305         $ 543,705         $ 634,980         $ 736,933         $ 839,909       $ 969,987         $ 1,165,700
                                                                                                                                                                
Cost of Revenue:
Third Party and
Other Cost of         $ 25,050          $ 32,169          $ 31,316          $ 51,419          $ 62,580          $ 40,155        $ 15,475          $ 27,002
Revenue ^(3)
Direct Cost of         -               -               -               -               6,671           46,159         115,560         196,789   
Revenue ^ (3)
Total Cost of         $ 25,050          $ 32,169          $ 31,316          $ 51,419          $ 69,251          $ 86,314        $ 131,035         $ 223,791
Revenue
% of North America      18          %     20          %     19          %     29          %     29          %     33        %     45          %     60          %
Total Revenue
                                                                                                                                                                
Gross Profit
Third Party and       $ 111,562         $ 125,036         $ 130,209         $ 128,219         $ 168,404         $ 166,964       $ 143,070         $ 138,774
Other
Direct                 -               -               -               -               910             6,903          17,498          12,786    
Total                 $ 111,562         $ 125,036         $ 130,209         $ 128,219         $ 169,314         $ 173,867       $ 160,568         $ 151,560
% of North America      82          %     80          %     81          %     71          %     71          %     67        %     55          %     40          %
Total Revenue
                                                                                                                                                                
Operating (Loss)
Income Excl
Stock-Based           $ (21,778   )     $ (10,501   )     $ 18,836          $ 18,239          $ 40,172          $ 43,429        $ 39,093          $ 17,032
Compensation (SBC),
Acquisition-Related
Expenses
Year-over-year          N/A               (2,678    ) %     496         %     N/A               N/A               N/A             108         %     (7        ) %
growth
% of Consolidated
Operating (Loss)        22          %     17          %     1,113       %     102         %     59          %     60        %     77          %     124         %
Income Excl SBC,
Acq-Related
Operating Margin
Excl SBC,
Acq-Related (% of       (15.9     ) %     (6.7      ) %     11.7        %     10.2        %     16.8        %     16.7      %     13.4        %     4.5         %
North America Total
revenue)
Year-over-year          (5,879    )       (562      )       603               3,494             3,278             2,337           170               (570      )
growth (bps)
Operating (Loss)
Income TTM Excl       $ (40,901   )     $ (51,024   )     $ (35,348   )     $ 4,796           $ 66,746          $ 120,676       $ 140,933         $ 139,726
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (12.9     ) %     (11.6     ) %     (6.5      ) %     0.8         %     9.1         %     14.4      %     14.5        %     12.0        %
North America Total
TTM revenue)
Year-over-year          (3,604    )       (2,266    )       (1,467    )       596               2,197             2,601           2,100             1,120
growth (bps)
                                                                                                                                                                
International
Segment:
Gross Billings ^(1)   $ 353,022         $ 559,259         $ 756,232         $ 755,061         $ 801,243         $ 738,401       $ 665,887         $ 801,500
Year-over-year          N/A               5,057       %     1,115       %     283         %     127         %     32        %     (12       ) %     6           %
growth
Year-over-year
growth, excluding       N/A               4,587       %     1,021       %     287         %     138         %     45        %     (4        ) %     9           %
FX ^ (4)
% of Consolidated       53          %     60          %     65          %     61          %     59          %     57        %     55          %     53          %
Gross Billings
Gross Billings ^(1)   $ 623,367         $ 1,171,781       $ 1,865,774       $ 2,423,574       $ 2,871,795       $ 3,050,937     $ 2,960,592       $ 3,007,031
TTM
                                                                                                                                                                
Revenue:
Third Party and       $ 158,911         $ 235,377         $ 261,464         $ 298,872         $ 309,069         $ 295,866       $ 265,019         $ 247,351
Other Revenue ^ (2)
Direct Revenue ^       -               -               7,172           13,654          11,649          12,288         11,930          15,600    
(2)
Total Revenue         $ 158,911         $ 235,377         $ 268,636         $ 312,526         $ 320,718         $ 308,154       $ 276,949         $ 262,951
Year-over-year          N/A               7,709       %     947         %     273         %     102         %     31        %     3           %     (16       ) %
growth
Year-over-year
growth, excluding       N/A               7,013       %     868         %     276         %     112         %     44        %     13          %     (14       ) %
FX ^(4)
% of Consolidated       54          %     60          %     62          %     64          %     57          %     54        %     49          %     41          %
Revenue
Revenue TTM           $ 271,440         $ 503,803         $ 746,785         $ 975,450         $ 1,137,257       $ 1,210,034     $ 1,218,347       $ 1,168,772
                                                                                                                                                                
Cost of Revenue:
Third Party and
Other Cost of         $ 14,715          $ 22,634          $ 31,023          $ 35,463          $ 40,049          $ 36,877        $ 38,698          $ 36,903
Revenue ^(3)
Direct Cost of         -               -               5,707           9,383           10,198          11,993         12,053          21,778    
Revenue ^(3)
Total Cost of         $ 14,715          $ 22,634          $ 36,730          $ 44,846          $ 50,247          $ 48,870        $ 50,751          $ 58,681
Revenue
% of International      9           %     10          %     14          %     14          %     16          %     16        %     18          %     22          %
Total Revenue
                                                                                                                                                                
Gross Profit
Third Party and       $ 144,196         $ 212,743         $ 230,441         $ 263,409         $ 269,020         $ 258,989       $ 226,321         $ 210,448
Other
Direct                 -               -               1,465           4,271           1,451           295            (123      )      (6,178    )
Total                 $ 144,196         $ 212,743         $ 231,906         $ 267,680         $ 270,471         $ 259,284       $ 226,198         $ 204,270
% of International      91          %     90          %     86          %     86          %     84          %     84        %     82          %     78          %
Total Revenue
                                                                                                                                                                
Operating (Loss)
Income Excl SBC,      $ (76,506   )     $ (51,808   )     $ (20,528   )     $ (287      )     $ 27,418          $ 28,505        $ 11,395          $ (3,329    )
Acq-Related
Year-over-year          N/A               (125      ) %     21          %     100         %     N/A               155             N/A               1060        %
growth
% of Consolidated
Operating (Loss)        78          %     83          %     (1,213    ) %     (2        ) %     41          %     40        %     23          %     (24       ) %
Income Excl SBC,
Acq-Related
Operating Margin
Excl SBC,
Acq-Related (% of       (48.1     ) %     (22.0     ) %     (7.6      ) %     (0.1      ) %     8.5         %     9.3       %     4.1         %     (1.3      ) %
International Total
revenue)
Year-over-year          N/A               74,265            9,392             14,474            5,669             3,126           1,170             (120      )
growth (bps)
Operating (Loss)
Income TTM Excl       $ (247,063  )     $ (275,824  )     $ (270,298  )     $ (149,129  )     $ (45,205   )     $ 35,108        $ 67,031          $ 63,989
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (91.0     ) %     (54.7     ) %     (36.2     ) %     (15.3     ) %     (4.0      ) %     2.9       %     5.5         %     5.5         %
International Total
TTM revenue)
Year-over-year          N/A               70,992            13,508            13,628            8,704             5,765           4,170             2,080
growth (bps)
                                                                                                                                                                
Consolidated
Results of
Operations
Gross Billings ^(1)   $ 668,174         $ 929,249         $ 1,157,210       $ 1,230,868       $ 1,354,800       $ 1,286,676     $ 1,218,256       $ 1,520,452
Year-over-year          1,405       %     916         %     496         %     196         %     103         %     38        %     5           %     24          %
growth
Year-over-year
growth, excluding       1,378       %     859         %     465         %     198         %     108         %     47        %     11          %     25          %
FX ^(4)
Gross Billings ^(1)   $ 1,369,139       $ 2,206,964       $ 3,169,902       $ 3,985,501       $ 4,672,127       $ 5,029,554     $ 5,090,600       $ 5,380,184
(TTM)
Year-over-year          1,651       %     1,227       %     804         %     435         %     241         %     128       %     61          %     35          %
growth
                                                                                                                                                                
Revenue:
Third Party and       $ 295,523         $ 392,582         $ 422,989         $ 478,510         $ 540,053         $ 502,985       $ 423,564         $ 413,127
Other Revenue ^(2)
Direct Revenue ^(2)    -               -               7,172           13,654          19,230          65,350         144,988         225,175   
Total Consolidated    $ 295,523         $ 392,582         $ 430,161         $ 492,164         $ 559,283         $ 568,335       $ 568,552         $ 638,302
Revenue
Year-over-year          1,358       %     915         %     426         %     186         %     89          %     45        %     32          %     30          %
growth
Year-over-year
growth, excluding       1,332       %     858         %     401         %     188         %     95          %     53        %     38          %     31          %
FX ^(4)
Total Consolidated
Revenue
TTMYear-over-year     $ 588,192         $ 942,108         $ 1,290,490       $ 1,610,430       $ 1,874,190       $ 2,049,943     $ 2,188,334       $ 2,334,472
growth, excluding
FX (1)
Year-over-year          1,594       %     1,205       %     761         %     415         %     219         %     118       %     70          %     45          %
growth
                                                                                                                                                                
Cost of Revenue:
Third Party and
Other Cost of         $ 39,765          $ 54,803          $ 62,339          $ 86,882          $ 102,629         $ 77,032        $ 54,173          $ 63,905
Revenue ^(3)
Direct Cost of         -               -               5,707           9,383           16,869          58,152         127,613         218,567   
Revenue ^(3)
Total Consolidated    $ 39,765          $ 54,803          $ 68,046          $ 96,265          $ 119,498         $ 135,184       $ 181,786         $ 282,472
Cost of Revenue
% of Total
Consolidated            13          %     14          %     16          %     20          %     21          %     24        %     32          %     44          %
Revenue
                                                                                                                                                                
Gross Profit
Third Party and       $ 255,758         $ 337,779         $ 360,650         $ 391,628         $ 437,424         $ 425,953       $ 369,391         $ 349,222
Other
Direct                 -               -               1,465           4,271           2,361           7,198          17,375          6,608     
Total                 $ 255,758         $ 337,779         $ 362,115         $ 395,899         $ 439,785         $ 433,151       $ 386,766         $ 355,830
% of Total
Consolidated            87          %     86          %     84          %     80          %     79          %     76        %     68          %     56          %
Revenue
                                                                                                                                                                
Operating (Loss)
Income Excl SBC,      $ (98,284   )     $ (62,309   )     $ (1,692    )     $ 17,952          $ 67,590          $ 71,934        $ 50,488          $ 13,703
Acq-Related
Year-over-year          N/A               (166      ) %     93.         %     N/A               N/A               N/A             N/A               (24       ) %
growth
Operating Margin
Excl SBC,
Acq-Related (% of       (33.3     ) %     (15.9     ) %     (0.4      ) %     3.6         %     12.1        %     12.7      %     8.9         %     2.1         %
Total Consolidated
revenue)
Year-over-year          (7,611    )       4,471             2,760             8,689             4,534             2,853           930               (150      )
growth (bps)
Operating (Loss)
Income TTM Excl       $ (287,964  )     $ (326,848  )     $ (305,646  )     $ (144,333  )     $ 21,541          $ 155,784       $ 207,964         $ 203,715
SBC, Acq-Related
Operating Margin
TTM Excl SBC,
Acq-Related (% of       (49.0     ) %     (34.7     ) %     (23.7     ) %     (9.0      ) %     1.1         %     7.6       %     9.5         %     8.7         %
Total Consolidated
TTM revenue)
Year-over-year          (7,208    )       (1,333    )       245               4,887             5,011             4,229           3,320             1,770
growth (bps)
                                                                                                                                                                
Operating (Loss)      $ (117,148  )     $ (101,027  )     $ (239      )     $ (14,972   )     $ 39,639          $ 46,485        $ 25,438          $ (12,861   )
Income
Year-over-year          N/A               (174      ) %     100         %     96.         %     N/A               N/A             N/A               14          %
growth
Operating Margin (%
of Total                (39.6     ) %     (25.7     ) %     (0.1      ) %     (3.0      ) %     7.1         %     8.2       %     4.5         %     (2.0      ) %
Consolidated
revenue)
Year-over-year          (8,192    )       6,949             6,838             19,213            4,673             3,391           457               100
growth (bps)
Operating (Loss)      $ (546,064  )     $ (610,272  )     $ (554,543  )     $ (233,386  )     $ (76,599   )     $ 70,913        $ 96,590          $ 98,701
Income TTM
Operating Margin
TTM (% of Total         (92.8     ) %     (64.8     ) %     (43.0     ) %     (14.5     ) %     (4.1      ) %     3.5       %     4.4         %     4.2         %
Consolidated TTM
revenue)
Year-over-year          (11,533   )       (2,457    )       1,427             11,983            8,875             6,824           4,740             1,870
growth (bps)
                                                                                                                                                                
Net (Loss) Income
Attributable to         (146,480  )       (107,406  )       (54,229   )       (65,379   )       (11,695   )       28,386          (2,979    )       (81,089   )
Common Stockholders
Weighted Average
Basic Shares            307,849           303,415           307,605           528,422           644,097           647,150         653,224           655,678
Outstanding
Weighted Average
Diluted Shares          307,849           303,415           307,605           528,422           644,097           663,123         653,224           655,678
Outstanding ^(5)
Net (Loss) Earnings
per Share
Basic                 $ (0.48     )     $ (0.35     )     $ (0.18     )     $ (0.12     )     $ (0.02     )     $ 0.04          $ (0.00     )     $ (0.12     )
Diluted               $ (0.48     )     $ (0.35     )     $ (0.18     )     $ (0.12     )     $ (0.02     )     $ 0.04          $ (0.00     )     $ (0.12     )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                

<td cla*Story too large*
Supplemental Financial Information and Business Metrics^(13)
(in thousands, except per share and headcount data and TTM
Gross Billings / Average Active Customer)
(unaudited)
                                                                                                                                   
                      Q1 2011 ^(8)     Q2 2011          Q3 2011          Q4 2011          Q1 2012          Q2 2012         Q3 2012          Q4 2012
                                                                                                                                                         
Depreciation and
Amortization
North America         $ 1,273          $ 1,910          $ 2,817          $ 4,515          $ 5,004          $ 6,669         $ 8,153          $ 10,754
International          6,325          6,188          4,241          4,786          6,712          6,141         7,157          5,211    
Consolidated          $ 7,598          $ 8,098          $ 7,058          $ 9,301          $ 11,716         $ 12,810        $ 15,310         $ 15,965
                                                                                                                                                         
The following is a quarterly reconciliation of Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense (benefit), net,
to the most comparable U.S. GAAP measure, “Operating (Loss) Income." ^(6)
Operating (Loss)
Income, excluding
stock-based           $ (98,284  )     $ (62,309  )     $ (1,692   )     $ 17,952         $ 67,590         $ 71,934        $ 50,488         $ 13,703
compensation and
acquisition-related
expense
Stock-based             (18,864  )       (38,718  )       (3,340   )       (32,668  )       (28,003  )       (27,084 )       (22,619  )       (26,411  )
Compensation
Acquisition-related
expense (benefit),     -              -              4,793          (256     )      52             1,635         (2,431   )      (153     )
net
Operating (Loss)      $ (117,148 )     $ (101,027 )     $ (239     )     $ (14,972  )     $ 39,639         $ 46,485        $ 25,438         $ (12,861  )
Income
                                                                                                                                                         
The following is a trailing twelve months reconciliation of Operating (Loss) Income, excluding stock-based compensation and
acquisition-related expense (benefit), net, to the most comparable U.S. GAAP measure, “Operating (Loss) Income." ^(6)
Operating (Loss)
Income, excluding
stock-based           $ (287,964 )     $ (326,848 )     $ (305,646 )     $ (144,333 )     $ 21,541         $ 155,784       $ 207,964        $ 203,715
compensation and
acquisition-related
expense TTM
Stock-based             (54,916  )       (89,674  )       (88,351  )       (93,590  )       (102,729 )       (91,095 )       (110,374 )       (104,117 )
Compensation
Acquisition-related
expense (benefit),     (203,184 )      (193,750 )      (160,546 )      4,537          4,589          6,224         (1,000   )      (897     )
net
Operating (Loss)      $ (546,064 )     $ (610,272 )     $ (554,543 )     $ (233,386 )     $ (76,599  )     $ 70,913        $ 96,590         $ 98,701
Income TTM
                                                                                                                                                         
The following is a quarterly reconciliation of foreign exchange rate neutral Gross Billings growth from the comprable quarterly periods of the prior year
to reported Gross billings growth from the comprable quarterly periods of the prior year.^(7)
International Gross
Billings, excluding     N/A              4,587      %     1,021      %     287        %     138        %     45        %     (4       ) %     9          %
FX
FX Effect              N/A            470       %    94        %    (4       ) %    (11      ) %    (13     ) %    (8       ) %    (3       ) %
International Gross     N/A              5,057      %     1,115      %     283        %     127        %     32        %     (12      ) %     6          %
Billings
                                                                                                                                                         
Consolidated Gross
Billings, excluding     1,378      %     859        %     465        %     198        %     108        %     47        %     11         %     25         %
FX
FX Effect              27        %    57        %    31        %    (2       ) %    (5       ) %    (9      ) %    (6       ) %    (1       ) %
Condolidated Gross      1,405      %     916        %     496        %     196        %     103        %     38
Billings

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